accounting and reporting for immovable assets (property). annual financial... · kwazulu-natal land...

Updated March 2018

Accounting and Reporting for

Immovable Assets (Property)

Accounting for Immovable Assets (Property)

Updated March 2018 of 36

Content

1. Purpose ............................................................................................ 3

2. Applicable legislation ..................................................................... 3

3. Recognition of immovable assets .................................................. 4

4. Recording and reporting ................................................................. 7

5. Measurement of properties ............................................................ 9

6. Interim arrangements ...................................................................... 9

7. Concluding remarks ...................................................................... 12

ANNEXURE A

Application of the Fair Value Model .................................................. 21

1. Purpose of this document ..................................................................................................... 21

2. Background ............................................................................................................................... 21

3. Valuation Methods ................................................................................................................... 21

4. Exceptional Cases ................................................................................................................... 22

5. Other specific cases ................................................................................................................ 24

6. Motivation and Benefits of Using Municipal Valuation Rolls and Nominal

Value for Exceptional Cases .......................................................................................................... 24

7. Sources to be Used ................................................................................................................. 25

8. Procedures to be Followed .................................................................................................... 25

9. Glossary of Terms & Abbreviations / Acronyms/ Definitions ...................................... 26

10. Definitions .................................................................................................................................. 27



1. Purpose

The purpose of this guidance is to provide clarity on the recognition and recording of immovable

assets in the financial statements and asset register of a department or any of its trading entities,

where such entity is a custodian of immovable property. The overall objective is to ensure that all

identifiable properties (land and or improvements) are accurately reflected in the books of government

thus providing a complete picture of immovable assets for decision making and accountability

purposes.

2. Applicable legislation

The guidance has been developed after due consideration of the following various pieces of

legislation, which amongst other, govern the acquisition, management and disposal of immovable

assets:

The Constitution of the Republic of South Africa, No. 108 of 1996;

The Constitution of the Republic of South Africa, No. 200 of 1993;

The Public Finance Management Act, No. 1 of 1999;

Land Administration Act, No. 2 of 1995;

State Land Disposal Act, No 48 of 1961 (as amended)

Land Survey Act, No. 8 of 1997;

Deeds Registries Act, No. 47 of 1937;

Government Immovable Asset Management Act, No. 19 of 2007 (GIAMA);

Eastern Cape Land Disposal Act, No 7 of 2000;

Free State Land Administration Act, No. 1 of 1998;

Gauteng Land Administration Act, No. 11 of 1996;

Kwazulu-Natal Land Administration and Immovable Asset Management Act, No. 2 of 2014;

Mpumalanga Land Administration Act, No. 5 of 1998;

Northern Cape Land Administration Act, No. 6 of 2002;

Northern Province Land Administration Act, No. 6 of 1999;

North West Land Administration Act, No 4 of 2001

Western Cape Land Administration Act, No. 6 of 1998;

Education Affairs Act (House of Assembly), No. 70 of 1988

KwaZulu-Natal Ingonyama Trust Act, No. 3 of 1994 (as amended) ;

Housing Act, No. 107 of 1997 (as amended);

South African Schools Act, No. 84 of 1996

Spatial Planning and Land Use Management Act, No 16 of 2013



3. Recognition of immovable assets

3.1 The National Department of Rural Development and Land Reform (DRDLR) shall record the following:

a. All un-surveyed state land, including those from the former TBVC States and Self Governing

Territories and state land in the former territory of the Republic of South Africa (pre 27 April 1994);

b. all surveyed but unregistered land parcels falling into the custodian function of the department;

c. all land vested with the national government situated in the former TBVC states and the former

Self Governing Territories including any communal land located in these areas with the exclusion

of land governed by the KwaZulu-Natal Ingonyama Trust Act, 1994 (Act 3 of 1994) as amended;

d. all former South African Development Trust land unless custodianship clearly resides with another

party in terms of specific legislation or have been confirmed vested in a province;

e. all land held for land reform purposes; and

f. any land where the department is deemed to be the custodian.

3.2 The National Department of Public Works (DPW) shall record the following:

a. all facilities used by the national government located on un-surveyed land or surveyed but

unregistered land including those from the former TBVC States and Self Governing Territories

and state land in the former territory of the Republic of South Africa (pre 27 April 1994), or located

on land governed by the KwaZulu-Natal Ingonyama Trust Act (pre 24 April 1994) as Amended;

b. all land in the former territory of the Republic of South Africa (pre 27 April 1994) registered in the

name of the National Government of the Republic of South Africa, where custodial powers have

not been assigned to another national department in terms of section 4 of the GIAMA;

DRDLR is responsible for driving the process to ensure that all abovementioned land parcels

are identified. Where the un-surveyed land cannot be quantified a description of the land should

be disclosed in a narrative format in the secondary information notes to the financial statements.

For example: ‘There are land parcels in the following provinces that have not been surveyed yet

Gauteng, Limpopo and North West. It is estimated that surveying would be completed during the

next ‘number of’ financial years.’



c. all land in the former territory of the Republic of South Africa (pre 27 April 1994) registered in the

name of any of the historical holders of national state land (e.g. Governor of the Cape of Good

Hope; Union of South Africa; Minister of Lands, Republic of South Africa; etc.) before the advent

of the democratic dispensation in 1994, that is deemed to vest in the national government, where

custodial powers have not been assigned to another national department in terms of section 4 of

the GIAMA;

d. all land vested with national government and situated in the former TBVC states and Self

Governing Territories occupied by a national department in support of its service delivery

objectives (e.g. a magistrate’s court or prison) and or where DPW performs the custodial

functions (barring the disposal thereof) in terms of section 4 of the GIAMA;

e. all former South African Development Trust land, which by proclamation vest with DPW;

f. all surveyed but unregistered land parcels falling within the custodian function of the

department;

g. all facilities constructed and used by the national government on land where DPW is not the

custodian subject to the terms any agreement written or oral;

h. all properties acquired by DPW for the discharge of its mandate;

i. any properties that fall within the custodianship of the national government through a process of

law or other forfeiture process except those specifically related to land reform;

j. any properties listed in the Deeds Registry as State properties not claimed by another custodian

(national or provincial) until such time as a rightful custodian can be identified; and

k. any property where the department is deemed to be the custodian.

DPW is responsible for the co-ordination and identification of properties vested with national and

provincial government and as such should liaise with the national departments and the

provinces to identify any possible omissions or duplications. The department should also liaise

with the Director-General of DRDLR (as the competent authority to issue the certificate)

regarding Item 28 (1) Certificates that have been issued (also referred to as Section 239

Certificates in terms of the Constitution).



3.3 Provincial custodians should record the following:

a. all properties confirmed vested with a province shall be recorded by the department to which the

Premier has designated the function for the administration of such assets. This would normally be

the provincial department of public works. In the absence of such delegation, the assets shall be

reflected in the asset register of the Premier’s office;

b. where more than one custodian exists in a province, legislation should prevail for example, land

parcels designated for human settlement (including areas for roads and public open spaces

related thereto) should be recorded by the Department of Human Settlements as the custodian in

terms of the Housing legislation. Land in this instance represents ‘assets held for distribution’ and

should be reflected as Inventory and not immovable assets;

c. where specific legislation does not exist the delegation by the Premier of a specific mandate for

managing specific assets should prevail for example, the reporting of roads infrastructure by a

Departments of Roads where it exists as a separate function;

d. all facilities used by the provincial government located on un-surveyed land, or surveyed but

unregistered land or land governed by the KwaZulu-Natal Ingonyama Trust Amendment Act (pre

24 April 1994);

e. any properties where the province is deemed to be the custodian;

f. all facilities constructed, used and or maintained relating to a provincial function but not on

provincial land, subject to the terms of any agreement written or oral; and

g. all surveyed but unregistered provincial land parcels falling within the custodian function of the

province.

The provincial department responsible for the administration of the immovable assets must

ensure that all provincial properties are identified and recorded.

The department should also liaise with the national DPW as well as the Director-General of

DRDLR (as the competent authority to issue the certificate) regarding Item 28 (1) Certificates

that have been issued.

Where an agreement of deemed custodianship has been reached between a province and the

national custodians regarding land that should vest in a province, such agreement should be

formalised. A Section 42 transfer should be done to the province by the DRDLR/DPW for

recording purposes where the property was previously recorded in a register of the national

department, except where an Item 28(1) Certificate is issued at the same time.



3.4 Other custodians should record the following:

a. all properties where custodianship is confirmed vested in them through section 4 of the GIAMA;

b. all land allocated by any other legislation, proclamations or assignment prior to the GIAMA; or

c. properties assigned to custodians through section 18 of GIAMA.

4. Recording and reporting

The recording and reporting principles listed below must be applied (depending on the specific

reporting framework used, it may require additional disclosure, including measurement and

recognition considerations, by the trading entity):

a. all land for which an endorsed title deed is on hand in the name of the appropriate government,

national or provincial, should be recorded in the Asset Register of the custodian and reported on

in the note for immovable assets in the financial statements;

b. all land for which an Item 28 (1) Certificate (or Section 239 Certificate) has been issued, should

be recorded in the Asset Register of the custodian so appointed and reported on in the note for

immovable assets in the financial statements;

c. all land which by virtue of legislation is under the custodianship of a national or provincial

custodian and where there is no requirement to vest such land, should be recorded in the Asset

Register of the relevant custodian and reported on in the note for immovable assets in the

financial statements;

d. all land for which a title deed is on hand in the name of a national or provincial government

(including those in the name of a recognised historical name for the province or national) or

confirmed with the Deeds Registry, and appropriate for the custodian, should be recorded in the

Asset Register of that custodian and reported on in the note for immovable assets in the financial

statements, read with Section 239 of the Constitution, Act 200 of 1993;

e. all property which is deemed to vest in the custodian (per definition) should be recorded in the

Register of the deemed custodian and reported on in a narrative format below the note for

immovable assets in the financial statements;

f. land not yet surveyed should not be included in the Asset Register of the DRDLR but separately

disclosed in a narrative form, reflecting the province it is situated in and an estimation of when it

will be surveyed, below the disclosure note for immovable assets in the financial statements;



g. all surveyed but unregistered land parcels, without Item 28(1) certificates, should be reflected in

the Register of the relevant national or provincial custodian and reported on in an annexure to the

financial statements, reflecting movement during the year of properties registered;

h. all facilities constructed on land not yet surveyed and occupied by a national or provincial

department must be recorded in a separate Register by the national custodian or relevant

provincial custodian and reported on in a narrative format below the note for immovable assets in

the financial statements, indicating the number of facilities, functions of the facilities and average

duration of any agreements to use;

i. all facilities constructed on land where only a right to use exists must be recorded in a Register

and reported on in a narrative format below the note for immovable assets in the financial

statements, indicating the number of facilities, functions of and duration of use as per the right

given (the ‘right to use’ should be tested against the definition of an intangible asset and dealt with

accordingly);

j. properties, for which an agreement of custodianship had been reached and a transfer received,

(was in another register before) complying with Section 42 (of the PFMA), must be recorded in a

separate Register and disclosed in a narrative note to the financial statements. The Section 42

must be used between departments in the same sphere of government. The note should indicate

the number of land parcels. A reconciliation indicating movement during the year in terms of

transfers received and issued, should be indicated;

k. the national custodian must present in narrative format an overall view reflecting requests for Item

28 (1) lodged and issued for national custodians and per province during the year, as well as the

balance to be issued. An estimate should be given for issuing the remainder with motivation for

the timeline. An overall view of total land parcels still to be vested could be given by the national

custodians expressed as a percentage of total identified state land, where available;

l. construction of or improvement to a facility on a custodian’s land should be recorded in the Asset

Register of the budget holder when the asset is ready for use and reported on in the note for

immovable assets in the financial statements. On final completion of the project the asset must be

transferred to the relevant custodian fulfilling the requirements of Section 42 of the PFMA. In the

year of transfer it must be recorded in the Asset Register of the custodian and reported on as a

non-cash transfer in, in the notes for immovable assets to the financial statements. The budget

holder should record a transfer out in the Asset Register and report a non-cash transfer out in the

notes to the financial statements;

m. any land acquired by a user for the construction of a facility must be reflected in its Asset Register

on registration of title and subsequently transferred to the appropriate national or provincial

custodian complying with Section 42 of the PFMA;



n. any properties recorded (by the DPW) as a result of an indication by the Deeds Registry that it is

state land but unclaimed by another custodian, must be recorded in a Register and reported on as

a contingent asset in an annexure to the financial statements until such time as the rightful

custodian or owner can be identified.

5. Measurement of properties

Measurement of properties should be done in line with the Modified Cash Standard (MCS). Assets

captured in the Asset Register should comply with paragraphs .69 to .73 of the MCS Chapter on

Capital assets, which dictates that measurement should be at cost and where not reliably

determinable, at fair value.

a. Fair value can be determined by applying the Fair Value Model developed for custodians

attached as Annexure A;

b. Where land parcels are utilised for mixed-use purposes and or where the possible benefit to the

entity in the use of the land may be limited due to circumstances, it may be necessary to re-

assess the determination of the value by the municipality;

c. Where land parcels have been subdivided or consolidated the MVR value must be assessed to

ensure that this information was taken into account by the municipality and that there is no

duplication of information;

d. When applying an average value to land parcels any limitation in the benefits that may be

enjoyed by the entity, should be taken into account as it would impact the value of a land parcel;

6. Interim arrangements

Until the vesting process has been finalised and the relevant custodians identified the following

arrangements should be followed:

If custodianship over a property is transferred to another department both departments should

comply with Section 42 of the PFMA.

The department (user or previous custodian) with the immovable asset in its asset register is

responsible for initiating communication with the appropriate custodian and on agreement

prepare the documentation, as required by Section 42, to transfer the custodianship over the

property to the appropriate custodian department.

Note: The use of a Section 42 transfer is not applicable where a transfer is done as part of the



a. The recording of structures constructed or under construction on tribal or communal or private or

municipal land will be dependent on the terms and conditions of the agreement with the relevant

tribal/communal/municipal authority. Where the intention is not clear, other matters to be taken

into consideration include who will be responsible for the maintenance of the building in future,

who will pay for the municipal services and who will benefit from the use of the asset (reporting

will be facilitated where progress payments are accumulated during the construction period and

the transfer to the beneficiary done through the asset register of the budget holder);

b. The cost of construction on a custodian’s land (new structure or improvement of existing facilities)

should be recorded by the budget holder during construction (reflected as work in progress) and

once the facility is ready for use included in the Asset Register of the budget holder. On final

completion of the project (project close out) the costing should be done by the budget holder and

its Asset Register updated. Subsequent to that the facility must be transferred to the appropriate

custodian complying with section 42 of the PFMA;

vesting process or in an arms’ length commercial transaction.

Further, the use of a Section 42 transfer, is not a replacement or substitute for the legal process

of title registration or endorsement whichever is appropriate.

Construction on a custodian’s land must be recorded in the asset register by the budget holder

when ready for use (taken out of work in progress) and the improvement transferred to the

custodian on final completion of the project.

Until a project is finalised the budget and the underlying asset should not be separated by the

budget holder. On finalising the project the asset with verifying documentation should be

transferred to the custodian as required by Section 42 of the PFMA.

Note:

Where the municipal value was used by the custodian as deemed cost for the existing asset,

the custodian should on updating its asset register, ensure that the improvement is not already

included in the municipal value used. Where the municipal value was dated before the

improvement was made the value of the improvement as per the Section 42 documentation

must be added to the municipal value to determine a new carrying value for the asset. The

custodian should then request the municipality to update its valuation of the property, taking the

improvement into account, but the asset register value should not be changed to that of the

new valuation as that will constitute a revaluation in contravention of the MCS chapter on

capital assets paragraph .88.



c. Facilities, ready for use, located on land as noted in (a) and (b) above must be recorded and

disclosed from the 2013/14 financial year, thus only projects where the underlying asset was

‘ready for use’ during 2013/14 and thereafter should be so recorded, thus prospective application

not retrospectively. (The intention is that the arrangement should be applied prospectively and

that departments will have time to prepare for the accumulation and disclosure of construction

cost as work in progress, going forward after 2012/13);

d. Where land that should be recorded and disclosed by other custodians for example, Department

of Defence or Water and Sanitation, but are still included in the Asset Register of another national

custodian, it may remain as such for the 2012/13 financial year-end but should be reflected by the

appropriate custodian for the 2013/14 financial year-end. A transfer in terms of Section 42 of the

PFMA must be initiated by the custodian who currently has the assets in its Asset Register;

e. The timing of entitlement that conveys custodianship should be used as guidance for inclusion in

the asset register of a custodian, for example:

i. An agreement between national and provincial custodians that property should vest with a

provincial custodian is the point where sufficient evidence of custodianship has been

provided to request an Item 28 (1) Certificate. The assets can be transferred to the provincial

custodian using the Section 42 process and the assets disclosed in narrative form until the

issue of the Item 28 (1) Certificate, where after it will be recorded in the Asset Register and

disclosed in financial terms in the note to the financial statements as the registration process

(with the Deeds Office) will be the administrative completion of the entitlement already

gained;

ii. Where a situation of deemed custodianship exists the property can be included in the

Register of the deemed custodian but, for available verifiable reasons, cannot be done at

present;

iii. The date as set out in the notification afforded through legislation (for example Schools Act

including proclamations, for State-aided schools) will be the date entitlement is gained of

custodianship and will be the indicator for inclusion in the relevant Asset Register. The

endorsement of the title deed by the Deeds Office will be the administrative completion of the

entitlement already gained;

iv. In circumstances where an Item 28 (1) Certificate is issued for surveyed but unregistered

land parcels the custodian must include such land parcels in the Asset Register as the

registration process will be the administrative completion of ownership already entitled to. In

such circumstances the municipality must be contacted and requested to value the property

to ensure a valuation is included in the next supplementary municipal roll. The custodian

should include a narrative under the secondary information note to the financial statements

relating to immovable assets, to indicate to users the number of properties included in the



Asset Register awaiting valuation by the municipality. The custodians are discouraged from

having costly formal valuations done instead of obtaining a municipal valuation (Fair Value

Model (Annexure A)) as this could lead to duplication of effort and incurrence of fruitless and

wasteful expenditure;

f. As an interim measure for measurement, where a custodian does not have a reliable cost or fair

value and is awaiting the municipal valuation or is still in progress with the valuation process, such

as for newly surveyed and vested properties, whether registered or not, the affected properties

may be reflected at the same value as for exceptional cases. Where this option is used the

custodian must indicate the reason for the lack of cost and or fair value and must year on year

reflect a reconciliation to indicate the progress made during a particular year in establishing a fair

value for the properties previously included in the asset register awaiting fair value. The reason

should be included as a narrative under the secondary information note for the immovable assets

in the financial statements and the number of properties so affected clearly indicated.

g. Any issues experienced with measurement (such as mixed use or subdivisions) should be

explained in narrative format, giving the user an understanding of the problem. These issues

should be addressed during the implementation process of the Model and future alignment to best

practice (principles of generally recognised accounting practice) which, may result in different

classification and treatment in recording going forward.

h. Information currently included with regards to the asset register is for purposes of transparency

and aligned to the legislative requirements of custodians. Where custodians are not able to

quantify issues in financial terms, the issues should be covered in additional disclosure in

narrative format.

7. Concluding remarks

The above principles are as required by legislation with allowances for practical purposes without

contravention of the spirit of the legislation and any practice note or exemption previously issued by

the national or provincial treasuries which contradicts the above is null and void and is hereby

withdrawn.

The custodial functions in a province can differ from the broad guidance given in this document due to

provincial legislation pre-dating GIAMA, in such cases the principles in this document should be

applied rather than the letter.

The guidance also places responsibility on the national custodians to actively lead the completion of

the surveying and vesting processes to ensure all State properties are appropriately recorded and

reported on.



The utilisation of the Section 42 process is considered appropriate as the transfer of custodianship is

seen as a transfer of function (of managing the asset) from one accounting officer to another. The

intention is further to assist with the creation of an audit trail of documentation which is currently

lacking in the immovable asset environment.

In determining custodianship the mandate of a specific department should be taken into account in

deciding where recording and reporting should take place for example, land specifically acquired or

allocated for human settlement should be recorded and reported on by the Department of Human

Settlement as inventory. Reporting should be done in terms of the applicable framework.

The postponement of the implementation of certain sections of GIAMA as outlined in Government

Gazette no 32109 of 28 April 2009 does not impact on the above but refers to the asset management

plan and should not be confused with the recording of assets in the asset register.

This document was finalized in consultation with DRDLR and DPW and provincial Departments of

Works.



DEFINITION OF DOCUMENT SPECIFIC TERMINOLOGY USED

Agreement consensus has been reached between the national and provincial

custodians as to the appropriate custodian of a land parcel and sufficient

information has been handed to such custodian to initiate the request for

the Item 28 (1) certificate

Asset register the formal record of assets under the confirmed custodianship of an

entity utilised for financial reporting purposes

Confirmed vested a property is confirmed vested once the Item 28 (1) certificate has been

received whether title had been registered yet or not

Deemed custodian where the vesting process has not been finalised but there is sufficient

verifiable evidence available that indicates who the appropriate custodian

will be using Section 239 of The Constitution, Act 200 of 1993. The

following, among others, in combination could be used as possible

indicators:

- the property is occupied/ utilised by the department in performance of a mandate on a full-time / permanent basis and has done so for a considerable length of time;

- the property is being used exclusively to provide a service in terms of an allocated Schedule 6 competency (e.g. a school or clinic);

- the property is unlikely to be utilised for any other function or transferred to another custodian in the foreseeable future;

- there is a responsibility to perform maintenance and or improvements and costs have and are being incurred to this end;

- the municipal rates are being paid on a regular basis, (where applicable) for the property and has been done for a considerable period of time;

- there is a legal process underway or to be initiated to vest the property with the custodian (for relevant sphere) or sufficient verifiable evidence exist to motivate why it has not started as yet;

- the deemed custodian acknowledges accountability and responsibility for the property;

- other evidence that indicates that the department should be the custodian (evidence must be verifiable);

- a title deed for the property is not on hand as it has been lost or misplaced and a duplicate must be requested from the relevant Deeds Registrar. However, the property is reflected as State property per the information from the Deeds Office (Aktex);

- there is agreement with other custodians with regards to the claim over the land parcel

Facilities the structures built on or attached to land parcels

Final completion when all contractual obligations under the contract has been fulfilled, including the payment of retention monies, and a final costing can be done and the project closed

Item 28 (1) Certificate the certificate issued to confirm vesting also known as the Section 239

Certificate issued in terms of the Constitution to confirm vesting of land in

a provincial or national government

Property the word is used in its widest form as including land and or structures on

the land. The word must thus be read as appropriate for the situation for

example, where only land should be recorded only land should be

understood



Ready for use the project has progressed to the stage where the facility can be occupied for use as intended by management for example, access is available for vehicles, people, etc., to the extent that normal business can be conducted

Recognition accountability to keep a record of the asset for management and

reporting purposes

Record documented detail of the asset in a register or otherwise for management

purposes

Reporting the disclosure of information in the financial statements or the notes

thereto in the form of a narration or representation in financial terms

Register a record of properties (land and or facilities) utilised, but for which no

formal title exits in the name of the reporting entity

Registered a record has been created in the deeds registry for the land parcel

Surveyed land parcels for which a formal surveying diagram signed by the

Surveyor-General is available

Transfer the process of transferring an asset with all relevant documentation as

envisaged by legislation (Section 42 of the PFMA). It may not necessarily

involve an endorsement of a title deed

Vested the process followed to conclusion leading to the issue of an Item 28 (1)

certificate and eventual endorsement of the title or creation of a title deed

Un-surveyed land for which a formal cadastral description and surveying diagram is

not available



MATRIX FOR RECORDING AND REPORTING

NDPW DRDLR PROVINCE

PROPERTY RECORD REPORT RECORD REPORT RECORD REPORT

Land not

surveyed

No No No Narrative per

province

estimated

survey

schedule

No No

Surveyed

not

registered

In Register

of

custodian

Narrative

note,

number of

land parcels

and

movement

In Register

of

custodian

Narrative

note,

number of

land parcels

and

movement

In Register

of

custodian

Narrative

note,

number of

land parcels

and

movement

Surveyed

not

registered

Item 28 (1)

issued to

custodian

In Asset

Register of

custodian

Narrative

note number

of land

parcels and

movement in

respect of

valuations

requested

In Asset

Register of

custodian

Narrative

note number

of land

parcels and

movement in

respect of

valuations

requested

In Asset

Register of

custodian

Narrative

note number

of land

parcels and

movement in

respect of

valuations

requested

Title deed In Asset

Register

Financial

disclosure

In Asset

Register

Financial

disclosure

In Asset

Register

Financial

disclosure

Title deed – historical name

In Asset Register

Financial

disclosure

In Asset Register

Financial

disclosure

In Asset Register

Financial

disclosure

Item 28 (1)

certificate

issued

In Asset

Register

Financial

disclosure

In Asset

Register

Financial

disclosure

In Asset

Register

Financial

disclosure

Agreements

and Section

42 transfer

done (land)

No (out)

In register

(in)

Narrative

and

reconciliation

of movement

No

In register

(in)

Narrative

and

reconciliation

of movement

In register

(in)

No (out)

Narrative

and

reconciliation

of movement



NDPW DRDLR PROVINCE

PROPERTY RECORD REPORT RECORD REPORT RECORD REPORT

Facilities on land that is not in the Asset Register

In Register where used by national department

Narrative note; number of facilities and purpose of use

No No In Register where used by provincial department

Narrative note; number of facilities and purpose of use



SUMMARY OF CONCEPTS AND PRINCIPLES

Recognition Concept Basis for recording

Reporting

Asset Register Title Endorsed Title deed

Item 28(1)

Historic name

Specific legislation

Capital budget spend (ready for use)

Financial terms

(Apply valuation model)

Ownership

Existence

Use

Control

Register Control State land used without title

Facilities used

Deemed custodian

Section 42

Narrative note with or without an annexure

(Not yet requirement to apply valuation model)

Existence

Use

Control

Register Deeds Registry information indicates State land

No claim from any government for custodianship

Contingent possible asset narrative and annexure

Existence

No register Un-surveyed land

None Narrative Existence



ANNEXURE A

The Fair Value Model

Based on Municipal Valuation Rolls, Sales Comparison, Exceptional Cases,

and Replacement Cost to Immovable Asset Registers

of National and Provincial Custodians as a Carrying Value



Content

Application of the Fair Value Model .................................................. 21

1. Purpose of this document ..................................................................................................... 21

2. Background ............................................................................................................................... 21

3. Valuation Methods ................................................................................................................... 21

4. Exceptional Cases ................................................................................................................... 22

5. Other specific cases ................................................................................................................ 24

6. Motivation and Benefits of Using Municipal Valuation Rolls and Nominal Value for

Exceptional Cases ........................................................................................................................... 24

7. Sources to be Used ................................................................................................................. 25

8. Procedures to be Followed .................................................................................................... 25

9. Glossary of Terms & Abbreviations / Acronyms/ Definitions ...................................... 26

10. Definitions .................................................................................................................................. 27



Application of the Fair Value Model

1. Purpose of this document

The purpose of this document is to propose the application of fair values or a minimum

nominal value as deemed cost, for certain exceptional cases, to properties that have

carrying values that need to be replaced given that they are unreliable and cannot be

supported by adequate records to satisfy the current National Treasury MCS for reporting

and/ or external audit requirements.

2. Background

The National and Provincial Departments initially recognise immovable assets based on the

cost of the item. The cost of an asset is defined as the total cost of acquisition. Where the

cost couldn’t be determined accurately, the immovable capital asset was stated at R1 unless

the fair value had been reliably estimated (MCS chapter on capital assets .69 and .72).

The majority of carrying values (historical cost) in the Immovable Asset Registers (IARs) and

Annual Financial Statements (AFS) are not reliable and can no longer be traced to

supporting documentation or valuation methods given the state of accounting records and

lack of audit trail.

In the current accounting framework, the application of fair value is permitted where the

initial cost of an asset is either unknown, cannot be reliably determined, or where the asset

was acquired at a value less than the actual cost (MCS chapter on capital assets .71).

3. Valuation Methods

The IAR GITC Asset Register Task Team has recommended three methods to be

considered in determining the fair values of immovable assets:

Municipal valuation rolls (and supplementary rolls) (MVR) can be utilised as the

default method to determine a fair value as deemed cost. The municipal rolls, where

rates are paid in accordance with the rolls, are considered to be third party

documents (independent from the department) and the audit outcome of the

municipality thus irrelevant. Where the Municipal value is disputed an alternative fair

value should be determined.

Market based value (Sales Comparison method): – This method takes into account

comparable properties that have been sold recently in the same area and

adjustments for rights, location, time, size, shape and layout. It can be used in the

absence of Municipal values or where MVR values were deemed to be out-dated

/unreliable (with reasons documented). This method can be used for vacant land,

farms & some residential properties.



Depreciated replacement cost (DRC) – value calculated by using the acquisition cost

of a similar asset which is then adjusted by taking into account condition

(depreciation/impairment) or functionality of the asset, this method can also be used

in the absence of reliable Municipal values for certain specialised properties, e.g.

hospitals, airports, weighbridges, etc.

4. Exceptional Cases

Admiralty Reserve

Definition: Usually an un-surveyed area wherever it exists, that is mostly delineated

as the area between the high water mark and a specific distance inland from the high

water mark (the distance to the point of the first surveyed land parcels).

- Apply the nominal value of R1,000 per Admiralty Reserve

Note: Coastal reserves/ protected areas usually fall within the admiralty reserve and

where the first land parcel is bounded by the high water mark no admiralty reserve is

applicable

Commonages

Definition: Commonage or common pasture lands are lands adjoining a town or

village over which the inhabitants of such town or village either have a usufruct right

for grazing for their stock, and, more rarely, the right to cultivate a certain portion of

such lands, or in respect of which the inhabitants have conferred upon them by

regulation certain grazing rights. The modern commonage is characterized by

miscellaneous land uses

Examples: Grazing, pastures, low cost housing and public infrastructure on same

land

- Apply the nominal value of R1,000 per land parcel

Communal Land

Definition: State Land allocated to tribal authorities and managed by Department of

Rural Development and Land Reform (DRDLR), and other custodians/institutions.

Example: Farms or Land in the former TBVC States traditionally/beneficially

occupied.


Inaccessible / Non Economic / Mountainous areas



Definition: Areas that is not valued due to their inaccessible geographical location

and topographical nature, including proclaimed or non-proclaimed conservation and

protected areas

Examples: National and provincial nature reserves and protected areas, mountain

catchment areas, wetlands, marshlands, swamps, caves, rivers, etc. like the Great

Fish River Wetland nature Reserve.


Islands , Offshore Rock Outcrops and Conservation Areas

Definition: Any piece of sub-continental land that is surrounded by water. Islands

can be offshore as well as inland islands (e.g. in rivers)

Examples: Off-shore islands will include islands such as Bird Island and St Croix

Island and inland islands, which can be found in a lake, a river or a reservoir will

include Driekops Island, the Kosi Bay islands and an example of a rocky outcrop is

found in ‘Hole in the Wall’ at Aasbank.

- Apply the nominal value of R1,000 per land parcel.

Note: Conservation Islands/Rocks, conservation areas such as world heritage sites

can fall into this category. Where the merits of the situation for the subject

property/island warrant it, a professional valuer may be appointed to undertake a

valuation. This is however envisaged to be necessary only in unusual circumstances.

Land parcels with Graves and Cemeteries

Definition: A land parcel used as a place of burial for the remains of people and

usually referred to as a cemetery or graveyard. Although used interchangeably a

graveyard is primarily the place of burial within the property of a church.

- Apply the nominal value of R1,000 per land parcel (where fully developed)

Note: Custodians should prioritise the transfer of land on which cemeteries and

graveyards are situated to local authorities (or churches where applicable) with the

exclusion of grave sites of a historic, military or heritage nature for example the

Cullinan Military Cemetery and the Prince Imperial burial site.

Road reserves

Definition: Land parcel surveyed or framed for the exclusive usage of road or access

purposes (all road classifications).

- Apply the nominal value of R1,000 per registered road reserve, regardless of

classification;



Note: The nominal value can also be applied to unregistered road reserves where the

reserve can be properly identified. Where a municipal value exists for a particular

registered road reserve, such value must be used instead of the nominal value.

Seashore

Definition: The seashore is the land that borders the ocean or sea. The area is

typically un-surveyed and consists of the land between the low water mark and the

high water mark commonly referred to as the beach.

Examples: Beaches are commonly referred to by the name of the area in which it is

situated in, such as Camps Bay, Shelley Beach, and Durban South Beach, etc.

- Apply the nominal value of R1,000 per beach

Other specific cases

Accounting for one Facility built over a number of Land Parcels (Where there

are Municipal Values)

Challenge: The current manner in which municipal valuation rolls are drafted is to

reflect a value for the land parcel including any improvements thereon. Splitting of the

land value from the structure value disclosed together on a municipal valuation roll

thus requires a methodology or policy for consistent treatment.

Example: Addington Hospital – 1 Facility built over 21 land parcels, with only 3 land

parcels indicated as having a municipal value. The value of the three land parcels

represents the municipal value for the entire facility (thus the structures and the other

18 land parcels).

- In these instances the asset register should reflect the values exactly as per

MVR – i.e. per land parcel including the value of the structure. The other land

parcels without value (after checking with the municipality) should be noted as

being included in the value.

- The exercise of splitting the value of the land parcel from the value of the

structure should be undertaken by a professional. Although land and the

buildings thereon are separable assets it is currently allowed to report the total

value under buildings and other fixed structures, where the value cannot be split.

Custodians should embark on a process to consolidate land parcels where a facility

is constructed over more than one land parcel to alleviate problems in this regard.

5. Motivation and Benefits of Using Municipal Valuation Rolls and

Nominal Value for Exceptional Cases



Municipalities use professional valuators to perform property valuations in order to

fairly and objectively determine the approximate market values. Property valuations

are performed at least every 4 years and the market values obtained are used in

determining rates and taxes paid by the property owners. Property valuations are

performed in accordance with Local Government Municipal Property Rates Act 6 of

2004 (MPRA), which requires a market related value to be determined.

Section 81 of the MPRA assigned the responsibility to the MEC for Local

Government to monitor and to ensure that municipalities comply with all provisions of

the Act, including the appointment of qualified valuators as required in terms of

Section 39 and processing the objections etc. DPWRT can therefore assume that

Local Government has complied with the requirement of MPRA of 2004.

All municipalities are required to perform regular general property valuations and

update the rolls with information relating to new valuations (supplementary rolls) and

therefore such values should reflect or approximate market value.

The use of a nominal value in exceptional cases, where values cannot be

determined, is restricted to specific cases and thereby limits abuse of the nominal

value and strengthens the reliability of the IAR and reporting thereon.

6. Sources to be Used

Municipal valuation rolls (MVR)

Aging Indices – ABSA Housing Review (www.absa.co.za)

Building cost Indices – aecom Africa Property and Construction Handbook

(www.aecom.com)

Additional information from third parties such as Lightstone (www.lightstone.co.za)

and Rode & Associates (www.rode.co.za) recognised as industry leaders

7. Procedures to be Followed

Obtain the latest MVR’s from all relevant municipalities or use previous rolls where

the latest rolls are unavailable

Determine if MVR is reliable with the correct data fields e.g. age of MVR, Extent etc.

Convert MVR into useable format i.e. excel

If the MVR is the previous one, adjust it using aging index (Vacant land and

residential properties only)

Match MVR value to IAR land parcel

Use this default method to determine value of land without improvements:

- Calculate total vacant land value and total extent for each town using the MVRs

http://www.absa.co.za/

http://www.aecom.com/

http://www.lightstone.co.za/

http://www.rode.co.za/



- Calculate the average vacant land ratio (total land value of vacant land divided by

total extent)

- Apply the vacant land ratio (per town) to the actual extent in the IAR (in that town)

to calculate land carrying value (average vacant land ratio x actual IAR extent for

the land parcel = land carrying value)

- Subtract the calculated land carrying value from the market value in the MVR to

determine improvement carrying value (MVR value less calculated land carrying

value = improvement carrying value)

- Subtract the calculated component value(s) from the improvement carrying value

Where, there is no or an unreliable municipal value or where there is no extent in the

IAR/MVR, use the Comparison approach:

This method takes into account comparable properties in the MVR that appear in the

same area and that are similar in size, shape and layout. This method can be used

for vacant land, farms, residential and some specialised properties like defence

facilities, prisons etc. Then follow these steps from the default method:

- Apply the average vacant land ratio to the actual extent in the IAR to calculate

land carrying value (average vacant land ratio x actual IAR extent for the land

parcel = land carrying value)

- Subtract calculated land carrying value from the compared market value from the

MVR to determine improvement carrying value (compared MVR value – calculated

land carrying value = improvement carrying value)

- Subtract the calculated component value(s) from the improvement carrying value

Where a similar property cannot be identified, use the Replacement cost method:

This method makes use of the vacant land ratio used in the default method to

calculate the land carrying value (vacant land ratio x land parcel extent in the IAR)

and building cost indices (www.aecom.com – Africa Property and Construction

Handbook) to calculate the improvement carrying value (cost indices per sqm. x the

extent of the improvement(s)). This method can be used for vacant land, residential

and specialised properties e.g. defence facilities, prisons etc.

8. Glossary of Terms & Abbreviations / Acronyms/ Definitions

MCS Modified Cash Standard

MVR Municipal Valuation Roll

IAR Immovable Asset Register

SDF State Domestic Facilities

DRC Depreciated Replacement Cost/ Replacement Cost

GITC Giama Implementation Technical committee



SQM Square Meters

TBVC - States Transkei, Bophuthatswana, Venda, Ciskei

DPWRT Department of Public Works, Roads and Transport

GRAP Generally recognised accounting practice

9. Definitions

An active market is a market in which all the following conditions exists:

o The items traded within the market are homogeneous;

o Willing buyers and sellers can normally be found at any time; and

o Prices are available to the public.

Condition assessment is an assessment of the current condition of an asset (and its components)

in relation to its service performance, as well as the maintenance or renovation required and

associated costs.

Fair Value refers to the amount for which an asset could be exchanged, or a liability settled,

between knowledgeable, willing parties at arms’ length transaction.

Immovable asset means any tangible asset acquired or owned by government, excluding any right

contemplated in the Mineral and Petroleum Resources Development Act, 2002 (Act No.28 of 2002).

Immovable assets may include land, fixed structures such as buildings and infrastructure assets.

Plant that is built-in to the fixed structures and is an essential part of the functional performance of

the primary asset is considered an immovable asset (though it may be temporarily removed for

repair)

Improvements refer to structures built or constructed on land, e.g. a building, Immovable

infrastructure assets on a land parcel.

Infrastructure assets are assets that usually display some or all of the following characteristics:

o They are part of a system or network;

o They are specialised in nature and do not have alternative uses;

o They are immovable, and

o They may be subject to constraints on disposal.

State Domestic Facilities (SDF)’s are improvements controlled by DPW but situated on land that is

not under the custodianship of the Minister of Public Works.

Useful life is: the period over which an asset is expected to be available for use by an entity, or The

number of production or similar units expected to be obtained from the asset by an entity.



REQUIRED FIELDS FOR AN IMMOVABLE ASSET REGISTER

The requirements for immovable assets are dealt with under the following headings:

A) Land

B) Improvements (Buildings and other structures)

C) Financial

The minimum information required for properties recorded in the immovable asset registers of National

and Provincial custodian departments is as follows:

A) LAND

REQUIREMENT DESCRIPTION OF REQUIREMENT

1. GENERAL

1.1 ASSET NUMBER Unique property code as per the asset register

1.2 ASSET CLASS Indicate URBAN or RURAL

1.3 ASSET TYPE Indicate ERF / FARM / AGRICULTURAL HOLDING (AH) / SECTIONAL TITLE (SS)/ etc.

1.4 DEEDS OFFICE Indicate relevant Deeds Office where the asset is registered or to be registered (in the case of surveyed but unregistered State Land)

2. GEOGRAPHICAL LOCATION

2.1 PROVINCE The relevant Province in which the asset is located

2.2 DISTRICT MUNICIPALITY

The relevant District Municipality in which the asset is located

2.3 LOCAL AUTHORITY

The relevant Local or Metropolitan Municipality in which the asset is located

2.4 MAGISTERIAL DISTRICT

The relevant magisterial district in which the property is located

2.5 PHYSICAL ADDRESS

The street address of the asset situated in a formalized urban area. Where a street address is not available, e.g. land locked property, property in rural area and townships without formal street names indicate NO STREET ADDRESS. Custodians may refer to a general locality description should there be no street address Notes:

- The physical address may not be applicable to certain land parcels for the Department of Rural Development and Land Reform.

- Departmental policy of a custodian should indicate how to describe and which properties the ‘no street address’ situation would apply to.




2.6 GPS COORDINATES

Either the physical address (2.5) or GPS-coordinates (2.6) must be

recorded as a minimum (Custodians should however strive to include

both).

The global positioning coordinates of the immovable asset to be reflected

in any of the following recognized formats:

Coordinates Decimal Decimal Deg. Min. & Sec.

Deg. & Decimal Min.

Latitude -32.3638° S 32.3638° S 32° 21' 49.68" -32° 21.828'

Longitude 28.4897° E 28.4897° E 28° 29' 22.92" 28° 29.382'

The GPS-points obtained from the Office of the Chief Surveyor-General or

any recognized GIS-system (e.g. Lapsis, Google Earth) is acceptable as a

geo-reference requirement.

Notes:

- One GPS co-ordinate will be acceptable in the case of a facility (land

use function) i.e. school or nature reserve situated on multiple land

parcels.

- Custodians using other formats of reflecting co-ordinates are

encouraged to change to one of the above examples with effect from

1 April 2016.

- The GPS-coordinates obtained from the Surveyor-General dataset

refer to the central point of the property polygon.

- Should GPS-coordinates be sourced from GIS-sources, it should be

taken as close as possible to the centre point of the land parcel.

- Should GPS-coordinates be sourced in situ, it should be taken at the

entrance to the property or any point on the property (custodian

policy should be developed).

3. PROPERTY DESCRIPTION – formal cadastral description as per approved Surveyor-General diagram

3.1 REGISTRATION DIVISION

The relevant registration division / administrative district under which the

asset is registered in the relevant Deeds Office – e.g. JR; Cape RD,

Colesberg RD

(Referred to as the Major Region Code)

3.2 TOWNSHIP NAME The relevant town name with regard to urban assets and relevant

registration division with regard to rural assets (farms) – e.g. Matatiele

(urban); Matatiele RD (rural)

(Referred to as the Minor Region Code)

3.3 LAND PARCEL The erf number / farm number / agricultural holding number / sectional title




number.

(Referred to as the Parcel Region Code)

3.4 LAND PORTION The erf portion number / farm portion number / agricultural holding portion

number.

(Referred to as the Portion Region Code)

3.5 LAND REMAINDER

Indicate if the land parcel or land portion is a remainder or not, by using

the following indicators: R/E = remainder and 0 = no remainder

3.6 FARM NAME The official name of the farm (where applicable) as depicted on the official

surveyor-general diagram, e.g. Aloe Ridge, Ntlaza Trading Station, Farm

65

3.7 S.G.-DIAGRAM NUMBER

The number of the approved S.G.-diagram / General Plan / Sectional

Diagram

3.8 EXTENT (ha) The extent of the asset in the metric unit of hectare as depicted on the

official survey-general diagram.

3.9 LPI CODE The land parcel indicator / giskey (21 digit code) as generated by the

Office of the Chief Surveyor-General.

Examples:

- N0ET00000000825100001, or

- T0JQ00000000005400002, or

- C00900000000017100002

(Combination of relevant Survey Office, major, minor, parcel and portion codes)

4. OWNERSHIP DETAILS

4.1 TITLE DEED NUMBER

The number as reflected on the Title Deed. In the event that the asset is

not registered in the Deeds Office (unregistered State Land), indicate

UNREGISTERED

Examples:

- T3344/1999

- G4/1908

- TX12/1977

4.2 REGISTRATION DATE

Date on which the asset was registered or endorsed in the name of

Government

4.3 REGISTERED OWNER

The registered owner(s) of the asset as described in the Title Deed. There

may be more than one owner in the case of shares held in a property (in




this instance the percentage ownership should be recorded).

Note:

The registered owner as reflected on Aktex / WinDeed is acceptable

where the Title Deed is unavailable (an indicator should reflect the source

of information – custodian policy needed).

4.4 VESTING DATE Date on which the Item 28(1) / Section 239 Certificate was issued by the

Department of Rural Development and Land Reform.

Note:

If the immovable asset is not subject to confirmation of vesting in terms of

the Constitution – indicate NOT APPLICABLE (e.g. property purchased by

custodian for exercising of its mandate)

4.5 OWNERSHIP CATEGORY

Refer to either ‘State-owned’ or ‘Non State-owned’

Note:

Lease-in properties (expense leases) are included under ‘non state-

owned’, where capital expenditure has been incurred on a site, but a

separate expense lease register should be available for recording all

leases.

5. LAND USE AND MANAGEMENT DETAILS

5.1 LAND USE Land use classification or facility type (where applicable) should be

indicated.

Note:

Land use and certain management details may not always be applicable

to the Department of Rural Development and Land Reform. Custodian

policy should indicate the applicability or not.

5.2 USER DEPARTMENT

Name of the relevant User Department that the asset is allocated to for

service delivery purposes.

If not allocated to a User Department, the Custodian Department should

be reflected as the User Department

5.3 FACILITY NAME Is the name of the facility as for the function that is performed on the site

e.g. Health District Office – Upington, Coleford Nature Reserve, Extension

Office for Agriculture, Government Garage, etc.

Notes:

In cases where land is vacant, a facility name will not be applicable. It

should be noted that one property (land parcel) might have more than

one facility. In these instances departmental policy should dictate how

this should be indicated to avoid duplication.




It is possible that the name of the facility can be the same as the name

of the building e.g. for schools, hospitals and clinics, etc. See 6.1

5.4 INCOME LEASE STATUS

This should be indicated with only a YES (valid lease agreement in place)

or a NO (valid lease agreement not in place).

In cases where there is a valid lease agreement, the relevant detail should

be reflected in a separate lease register with a linkage/unique

identifier/cross-reference to the immovable asset register. A policy on

what identifier to be used as the cross-reference should be developed to

ensure consistency.

The following minimum requirements must be covered in the Lease

Register:

Nature of lease (e.g. residential, business, etc.)

Name of lessee

ID-number of lessee / Company registration number

Commencement date

Expiry date

Escalation rate (percentage) and date

Rental per month / annual

Lease number and location

B) IMPROVEMENTS (BUILDINGS OR OTHER STRUCTURES)


6. IMPROVEMENT DETAILS

6.1 STRUCTURE NAME

Indicate the name of the building(s)/structure located on the land.

Note:

It is possible that ‘building name’ can also be the facility name, e.g.

Nompumelelo Clinic; Bluedowns Police Station; Stutterheim High

School, etc. In this instance it will be important to ensure no duplicate

names occur for facilities/ structures in different locations e.g. Madiba

High School, where one is in located in Queenstown and the other in

East London. Should this occur an additional identifier should be

available to distinguish the structures. A policy to the effect should be

developed.




Improvement details may not be relevant for the Department of Rural

Development and Land Reform but documented motivation should be

available where structures are not reflected.

6.2 FACILITY CODE A unique code generated by the Custodian for each facility/ structure).

Note:

To be phased in over a 2 (two) year period for reporting purposes. It will

be a minimum requirement for the 2018/2019 financial year.

6.3 LEVEL OF UTILIZATION

Utilization of facilities should be covered in the respective user asset

management plans (U-AMPs) of User Department.

Note:

This will not be required in the Asset Register, of custodians at this stage.

The following value-added information can be covered in the respective user asset management plans

(U-AMPs) and not in the Asset Register (IAR) until the 2020/2021 financial year. These requirements will

be phased in over the next 5 (five) years and are not an immediate requirement in this document:


IMPROVEMENT DETAILS

a SITE COVERAGE Combined extent (in m²) of the foot print of all improvements

(buildings/structures) of a facility over the site.

Note:

The extent may be calculated manually or vide GIS-calculation.

b EXTENT OF BUILDINGS

Combined and individual extent (in m²) of the floor areas (foot print) of all

improvements (buildings/structures) in a facility

Note:

This information must be available in the U-AMPs of User Departments.

c USABLE AREA Area, excluding common areas (e.g. balcony, lifts, passage, etc.) that is

available for accommodating line function work (Office accommodation

only)

Note:

This information should be available in the U-AMPs of User Departments.

d LEVEL OF UTILIZATION

Level of utilization expressed in a percentage against the usable area of a

facility.

e CONDITION The custodian assessment rating of the condition of a building / facility /




RATING structure (by way of using a technical condition assessment for example,

as stipulated in the Guideline for Custodians: Custodian Asset

Management Plans)

Notes:

The Custodian Assessment Rating for office accommodation to be

phased in over a two year period (2018/2019 FY) for C1, C2 and C3

functional performance rated buildings only

Condition Assessments to be completed within a five year cycle for

example, as required for applicable structures in terms of Section

13(1)(d)(iii) of Act 19/2007

f FUNCTIONAL PERFORMANCE RATING

The user’s perception of the functional performance of a building / facility /

structure by way of using a functional performance assessment as

stipulated in the Guideline for Users: User Asset Management Plans.

Note:

Functional performance ratings for office accommodation to be phased in

over a two year period (2018/2019 FY) and the balance of the portfolio

over a three year period (2021/2022 FY)

C) FINANCIAL The financial component of the Asset Register is guided by the Accounting Guide for Immovable

Assets (Modified Cash Standard towards alignment to GRAP)


7. GENERAL

7.1 LAND USE CLASS Refer to the categorisation of assets according to the Financial Accounting

Framework and SCOA (e.g. dwellings, non-residential buildings, heritage

assets, land and other fix structures including infrastructure networks)

7.2 NATURE OF ASSET

Refer to the categorisation of assets as per Accounting Manual for

Department (Capital Assets) (e.g. property, plant and equipment,

investment assets, infrastructure assets; heritage assets; biological

assets)

8. SECONDARY INFORMATION NOTE

8.1 ADDITIONS CASH Total value of money spend to acquiring (purchase price with transfer

costs) or constructing a structure including while still part of work in

process

8.2 ADDITIONS NON-CASH

Properties acquired without cash valued at fair value.

Newly confirmed vested properties to be recorded based on municipal

valuation or fair value as determined in terms of the Fair Value Model.

(Where municipal value not available yet, documented request to

municipality to value should be on hand.

Properties constructed and ready for use at total cost to date (by budget




holder).

Section 42 transfer received by a custodian from a budget holder at the

total cost of property.

Note:

As from 2016/2017 FY the initial cost of all newly confirmed vested

properties must be recorded at municipal value or fair value in terms of

the Fair Value Model

Existing properties previously recorded at R1 in the asset register must

be valued in terms of the Model by 2016/2017

8.3 ADDITIONS - RECEIVED CURRENT YEAR, BUT PAID IN PRIOR YEAR

Newly acquired properties which are not yet registered in the name of

Government, but for which the purchase price has been paid (monies held

in trust by conveyance attorney), where legal transfer is pending

registration

8.4 DISPOSALS – TRANSFERRED OUT / DESTROYED / SCRAPPED

Not disposed for money – e.g. exchanged, gratis transfer or write-off

(latter would only be applicable to structures)

Newly constructed structures transferred out (Section 42) from budget

holder to custodian on formal completion of project at total cost of project.

8.5 CLOSING BALANCE

The closing value of the asset as on 31 March of a financial year

9. VALUATIONS – applicable for current non-cash additions only (where cost is not available)

Note:

Valuations may not necessarily be applicable/ appropriate for the Department of Rural

Development and Land Reform but documented motivation must be available in instances where

valuation is thought to be inappropriate

9.1 MUNICIPAL VALUATION

As per latest valuation roll of the local municipality (consider prior or

subsequent improvements)

9.2 DATE OF MUNICIPAL VALUATION

Date when valuation roll was published by the local municipality – or if

different, the effective date of the valuation

9.3 NON-MUNICIPAL VALUATION

Valuation determined by – individual and qualification (professional/

expert)

9.4 DATE OF NON-MUNICIPAL VALUATION

Date of valuation certificate signed by professional

As from 1 April 2016, all immovable assets recorded as R1 in the asset register should be replaced with

the fair value of the property as per the approved Fair Value Model.

Notes:

Where the immovable asset register cannot maintain all the critical information it is recommended that

additional documentation with sufficient cross-referencing be kept to facilitate the proper management of



these assets. Separate registers for leases are acceptable. Information of or on buildings should be

available (cross checked) in the U-AMPs of User Departments.

An additional 5 (five years) of grace is allowed to facilitate the obtaining of information on improvements /

(structures) not in the asset register yet.

The use of documentation outside the asset register to carry outstanding or additional information is

encouraged in order to improve the management of assets and application of the life-cycle approach.

Since various systems being utilised at present, are not all able to create additional fields of information

as needed it therefore necessitates the use of documentation outside the AR. More information is better

than less, it creates a database for future decision making, which can be more informed and thereby

more effective, efficient and economical in the long run.

Additional information that can assist in the management of immovable assets could include detail on

occupants of buildings such as period of lease, escalation of rent, etc. In the case of land any claim by a

person or group with regards to the land would assist in the proper management of said land. This

information would normally be included under the heading ‘Accountability’ as a ‘Restriction’ but as the

field is not as yet required, it is encouraged that such information, once known, be accumulated as

additional to the AR for future use.

accounting and reporting for immovable assets (property). annual financial... · kwazulu-natal land...

Documents